Is a Corporation Like a Church?

Last week, the Supreme Court heard oral arguments in Sebelius v. Hobby Lobby and Conestoga Wood v. Sebelius. In both cases, for-profit corporations have challenged the Affordable Care Act’s requirement that employer-based health plans cover contraception, including certain methods—such as the morning-after pill—that the companies’ owners find objectionable on religious grounds. In both cases, the first question the Court must answer is whether for-profit corporations can have religious faith. For many people, the notion of a religious company rings false. Things get complicated, however, when you consider that thousands of U.S. corporations are, in fact, religious. They’re called churches.

As nonprofit “religious corporations” under Section 501(c)(3) of the Internal Revenue Code, churches enjoy a variety of legal benefits. For example, churches may flout certain employment discrimination laws when hiring or firing, on the theory that religious institutions should be able to oversee their own affairs, free from governmental intrusion. Hobby Lobby is arguing that it should be entitled to similar benefits—that, as a company, it shouldn’t be precluded from seeking religious accommodations just because it’s organized as a for-profit corporation. In the words of Hobby Lobby’s Supreme Court brief, legal rights shouldn’t “turn on a corporation’s tax status.”

Hobby Lobby’s lawyers, led by a former Solicitor General, Paul Clement, have worked hard to cast a churchlike aura around the company, even though its business has no religious dimension—the stores sell craft supplies. But, unlike many other companies that might qualify down the line for the kind of religious exemptions that Hobby Lobby is requesting, Hobby Lobby actually does seem to care about love-thy-neighbor ideals. Workers get paid higher than the national minimum wage; stores are closed on Sundays, to encourage employees to spend time with their families; and company-subsidized health care is—minus a few forms of contraception—affordable and robust. This inspired Justice Sonia Sotomayor to quip, during Clement’s portion of the argument last Tuesday, that he certainly “picked great plaintiffs.”

But the question is not whether Hobby Lobby behaves well. The question is whether Hobby Lobby is equivalent to a church for the purpose of opting out of the contraception mandate.

From a legal standpoint, the question depends on the difference, more generally, between for-profit and nonprofit corporations. In some legal settings, it makes a lot of sense to treat nonprofit and for-profit entities uniformly. It would be crazy, for example, to argue that for-profit corporations shouldn’t be able to appeal adverse legal rulings simply because they turn a profit—or, similarly, to argue that for-profit media corporations deserve less protection under the Freedom of the Press Clause than their non-profit counterparts.

But this case is different. For-profit corporations are bundles of assets with built-in liability protection (“limited liability”) for owners. This is what allows for mergers, acquisitions, spinoffs, and reorganizations; because corporate assets are transferable, and because owners cannot be held personally liable for actions taken by the company, corporate control can be bought and sold on the market, and corporate assets can easily be repurposed at the will of new owners. By contrast, no one owns the assets of a nonprofit corporation—at least, not in the normal sense of the term. A nonprofit corporation cannot be bought or sold. Its assets are deployed in the service of a specific purpose (the nonprofit’s mission), and their use is accountable to the public at large.

These observations may seem unrelated to the issue of religious exercise. But imagine that the Greens, the Christian owners and managers of Hobby Lobby, decide to sell Hobby Lobby to Walmart, and Walmart decides to keep the hobby chain intact as a subsidiary. Would Hobby Lobby still be a Christian corporation? Or imagine that the Greens, tired of hobby supplies, decide to exchange their interest in Hobby Lobby for that of another business; now, the Green family owns and operates the second business—call it Corporation A—while the previous owners of Corporation A own Hobby Lobby. Would Hobby Lobby still be a Christian corporation? Would Corporation A become a Christian corporation? In these scenarios, the difference between for-profit and nonprofit activity becomes crucial.

Even if it made sense to speak of a company’s religious faith, one would have to consider the faith of the human beings who comprise it. Then the question becomes: Which human beings? Whose faith matters, that of shareholders, executives, workers, or customers? These questions are not rhetorical. The Green family has been operating under the assumption that, as owners, they should be allowed to dictate Hobby Lobby’s religious identity. But it’s not clear why this should be the case. It would be one thing if Hobby Lobby’s owners, managers, and labor force were homogeneously Christian. But they are not. The Greens bear the burden of showing why they—as a small handful of comparatively wealthy and influential people in a company with thousands of employees—should exercise monopoly power over the company’s religious faith.

Constitutionally, there’s actually a strong argument against giving such power to owners or managers. The principle of religious neutrality, codified in the First Amendment, includes two complementary prohibitions. First, the Constitution prohibits laws that impede or discourage religion; second, it prohibits laws that endorse or encourage religion. The latter commitment comes under strain when laws offer religious entities an economic subsidy to the detriment of secular competitors. Worse still are laws that actually give incentives to people—in this case, to corporate managers who might want to avoid insurance premiums—to embrace religion falsely or opportunistically in order to avail themselves of a legal benefit.

If the corporate parties in this case prevail, there will likely be a flood of similar suits filed to obtain similar exemptions based on corporate religious beliefs. For example, a corporation adhering to the tenets of the Church of Christ, Scientist—which believes that illness may only be cured by prayer and supplication to God, not medicine—arguably could obtain an exemption from providing employee health coverage for anything other than religious healing, and thereby drastically cut expenses relative to its competitors.

Or, in the similar but more acerbic words of another amicus brief filed by corporate and criminal law professors:

It is very easy to imagine how companies would react if this Court were to rule in favor of Hobby Lobby and Conestoga. Companies suffering a competitive disadvantage will simply claim a “Road to Damascus” conversion.

One can imagine the new McKinsey practice group now—perhaps “revelation and conversion support”—complete with graphics and flowcharts, outlining the steps companies can take to assure regulators of their newfound faith.

Kiel Brennan-Marquez is an academic fellow at the Information Society Project, an intellectual center at Yale Law School.

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